aggressive investment portfolio

Do You Have an Aggressive Investment Portfolio?

One of the most common ways to invest is through the stock market. Your assets are probably exposed to market volatility even if it is not stocks. However, different asset classes react differently to market volatility. As one said,” no risk, no return,” good profits rarely come without risk. The greater the risk, the more return you are likely to receive. The most important thing for an investor is understanding your risk tolerance and reducing unnecessary risks. Here’s how to evaluate if your investment portfolio is too aggressive for you and steps to dial it back.


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What is an Aggressive Portfolio?

When financial experts refer to a portfolio as aggressive, they generally mean a portfolio with a significant chunk of funds invested in one asset type, like stocks. Even though stocks are attractive investments for long-term gains, they can fluctuate a lot in the short term. This can be problematic for those who plan to retire soon or face unexpected significant expenses. The goal of an aggressive investment portfolio is to obtain high returns by accepting high risk. Although the longer you hold them, the more likely you will receive a good reward, there’s no guarantee.  

The challenge is that what is an aggressive portfolio for one person may need to be more aggressive for someone else.

“Your portfolio needs to match your goals, and portfolios are not one size fits all. If your investments keep you up at night, you may be taking too much risk, or you may need to work with a professional to understand your investments better, ”

says Jay Zigmont, Founder of Childfree Wealth

How Do You Know if Your Investment Portfolio is Too Aggressive?

Here are some red flags that you might have a too-aggressive portfolio. 

You are worried about your portfolio all the time.

One of the most visible red flags that you are invested too aggressively is that your portfolio creates too much stress. If you have trouble sleeping because of your investments, you may be invested too aggressively. People tend to think that investing is all or nothing, either cash or investments. If you want to take less risk, some financial products have a minimum floor based on how much your investments can drop. However, there is no free lunch; you can be confident that you will only be able to receive a fraction of your rewards when the market is performing well at a cost. Although many believe investment products are rarely worth it, they have a place for extreme worriers. 

You don’t have any cash on hand.

If you know that you will need cash in the next few years, this needs to be factored into the customization of your portfolio. Of course, this doesn’t mean you need to sell your investments immediately; however, you can keep new contributions as cash or invest them into low-risk investments

If you don’t have an emergency fund, it is essential to build one. However, before taking on additional risk, you should have a solid financial foundation. A giant red flag is when people don’t have positive cash flow, an emergency fund, or health insurance; however, they are investing money that shouldn’t be invested. 

You are frequently trading. 

Those trading frequently are usually taking on more risk than they should. Aside from the tax disadvantage, studies show average day traders perform worse than the market average. When it comes to investing, it’s not only what you own but how you own your investments. Anyone who is trying to time the market and make a quick buck is probably taking on more risk than they should. 

A better approach is to have a long-term investment strategy and leave your investments alone. Even though it may not be the sexiest way to invest, buying low-cost index funds work well over the long term. 

Your portfolio lacks a solid asset allocation strategy.

Asset allocation is a process used to decide how much your investments will be allocated to a specific asset. An asset allocation helps balance risk with returns by investing in several asset classes. The goal is to create an asset allocation strategy mix of securities, like stocks, bonds, mutual funds, ETFs, and government securities, to help minimize your risk. 

Financial professionals deem a lack of diversification within a portfolio too aggressive for average investors’ portfolios. Conversely, you might have an unbalanced portfolio with no plan in place. However, it is also essential to understand that a conservative portfolio may do more harm than good. Therefore, working with a well-educated financial professional to create an asset allocation strategy might be the best option. 

What are the Disadvantages of Having a Highly Aggressive Investment Portfolio?

Here are the most common disadvantages of having an overly aggressive portfolio:


  • Your wealth will fluctuate a lot. If you are overexposed, your portfolio will shift often with huge swings. 
  • You may need access to money when your investments are down. If your investment portfolio is too aggressive and you only have a few years until retirement, you are taking the risk that the market will stay strong until you need to access your nest egg. If the market isn’t in your favor, you will have to start taking distribution in a down market. 
  • A too-aggressive portfolio may scare you to sell your investments early. The secret to getting a great return is to stay invested in the market. If your portfolio scares you to sell your investments, you lose the advantage of investing in stocks. 
  • Less diversification may be risker for less return. For example, if your entire portfolio is heavily in one stock, it may perform worse than the market average even though you took more risk.

What Can You Do If You Have an Aggressive Investment Portfolio?

Here are three steps you can take if you feel that your investment portfolio is too aggressive:

  • Create an investment plan with a financial planner: If you feel like your investments are frequently fluctuating, speak with a financial planner who can create an asset allocation strategy and help diversify your risk to ensure that you are not overly exposed.
  • Reduce risk: To counter an aggressive portfolio, you will have to reduce the amount of risk you are taking on. Reducing your risk can be done by reducing your stock market exposure, diverting funds to bonds, or allocating your monthly savings to a savings account can help.  
  • Use a target-date fund: If you don’t feel comfortable making investment portfolio changes yourself, use a target-date fund to manage your investments. A target date fund shifts investments from risky to less risky as your target date approaches.

Bottom Line 

Every investment portfolio is individualistic to a person’s needs, goals, and risk tolerance. Working with a financial advisor who can explore all aspects of your financial situation can help determine whether your investment portfolio suits you well.

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Danielle Miura, CFP®, is the founder of Spark Financials, a life and financial planning firm specializing in helping Sandwich Generation families manage their money. As a CERTIFIED FINANCIAL PLANNER™ professional, Danielle specializes in comprehensive financial plan development, financial education, and financial research.

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